The Export-Import Bank of the United States (EXIM) is the U.S. Government’s export credit agency, tasked with the mission of providing financial assistance in support of the export of products from the U.S. to international markets. The EXIM Bank allows for pre-export financing, with no transaction considered to large or small for the bank with an average of 85% of the bank’s transactions directly benefiting small businesses in the U.S. Of course Boeing falls into the 15% of business transactions that are not a small business … and a loan of US$1.3-billion for Air India’s acquisition of Boeing 787-837 aircraft, and a further loan of US$2.1-billion as a preliminary commitment supporting the future deliveries of Boeing aircraft to Air India is not exactly a small loan.
As Air India’s first Boeing 787 delivery draws closer, the Air Transport Association of America (ATA) is protesting EXIM’s loans to Air India citing the airline’s constant financial troubles and consistent teetering on the brink of collapse. The ATA, and its member airlines, believe Air India’s finical situation, including its loan defaults and it’s currently being arrears with multiple financial institutions, should disqualify the airline from receiving financial assistance from the U.S. Government.
While the ATA’s points on Air India are well founded, India is an ally of the United States, the two nations share a robust economic relations, and the U.S. and India share military relations, including the Obama Administration approving a US$5-billion deal for Boeing C-17 Globemaster III aircraft and GE F404-GE-IN20 engines, along with a US$2.1-billion deal for eight Boeing P-8 Poseidon aircraft. Given the U.S.’s relations with India and Boeing’s financial relationship with India, in military and commercial business sectors including a US$100-million Boeing-Air India maintenance-repair-overhaul (MRO) joint-venture facility in Nagpur, it would be hard for the ATA’s complaint to result in EXIM reneging on its loan promises to Air India.
Should the U.S. Government be funding Air India, a woefully financially failing state owned airline? In theory, probably not. That said, in the political and economic realms the U.S. Government and Boeing operate in with India, failing to provide the US$3.4-billion in loans to Air India could negatively impact Boeing’s massive financial interests in India, which support the U.S. economy in a massive scale.
Former U.S. Speaker of the House Tip O’Neill is famous for saying “All Politics Is Local,” however some politics is global.